This is a first in what I hope might become a series of posts about interesting business models that I observe, providing my unique brand of uninformed strategic commentary. I hope you like them!
Note these posts are about the quality of the business model and not the technical details pertaining to product itself.
We all like a bargain (especially in these difficult economic times), and us Shahs are known amongst the Indian community for liking that great deal more than most. Thus, a site like hotukdeals.com (henceforth referred to as HUKD) is a natural hunting ground, allowing us to find everything from TVs to frozen pizzas to shoes at a deep discount to retail price. As soon as I realise I need to buy something substantial it is this site, and not Amazon, that is my first port of call.
The rest of this post outlines what makes HUKD’s business model so great and why I use it all the time for buying useful stuff, but also a lot of crap that I don’t need but is cheap (especially painful now I have given up a regular income!).
How does HUKD work?
The core of HUKD is a forum where any member can post great deals, vouchers or freebies (henceforth collectively referred to as “deals”) that they find for any product or service, online or offline. These deals can then be rated by other members of the forum as either “hot” or “cold” which either adds or subtracts from that deal’s “heat score”. The forums can be browsed or searched by anyone who is looking to make a purchase of anything to see if there are any good deals on the product they are looking for. Simple, but effective!
How does HUKD make money?
To directly quote the “About HUKD” page: “The site is funded by using commission links on merchants where HUKD receives a commission if a product is purchased” – basically the site is one big fat affiliate marketer. Yes, the very same business you saw in all of those books, blogs and manuals telling you how easy it is to make millions from the internet but you knew were basically bullshit, but HUKD have actually done it well!
How big is HUKD?
The current user count is over 800K individuals who have generated over 1.3M threads and 15M posts between them. Annual revenues are not published but estimates I’ve seen put them at around £10M per annum.
Who owns HUKD?
The business was founded by Paul and Jen Nikkel*, who also founded Quidco, the UK’s largest cashback business. The business is now part of the Tipping Canoe group of businesses, a collection of global businesses trying to save consumers money.
Who are the competitors?
I haven’t come across any direct competitors (please let me know if you know of anyone) but there are lots of businesses in the game of offering deals and discounts to consumers and trying to save them money. Martin Lewis’s old joint moneysavingexpert.com (now part of moneysupermarket.com), the daily deals sites (Groupon, Living Social etc) and price comparison engines like pricerunner.co.uk and the businesses represented the stupid meerkat / fat opera singer (I can’t even bring myself to link to the businesses, I hate the adverts so much) are all sort of in the space but each have a slightly different take on savings to HUKD. What HUKD does better than all of them is to get users to generate content and form a community.
What’s so great about the HUKD business model?
I believe the secret sauce behind HUKD is that it treats itself as a community builder and not a sales machine. The mission clearly appears to be to provide a platform for its members to share great deals, and it has put in place all the apparatus required for this to happen:
- First and foremost, the approach of HUKD is, on the whole, unbiased and neutral. HUKD itself does not appear to take a view on any deal shared by the community and does not appear to actively promote any deal over another. Instead, it relies solely on the community to make judgements on what deals are. This is important as not every deal shared on the site makes HUKD money (as many companies may not be involved with affiliate marketing) but it makes the site the first resource for bargain hunters like me! As a result, unlike deal sites like Groupon and other price comparison sites, HUKD feels like your friendly uncle offering you advice on where you can get things you actually want cheaper, rather than trying to flog you stuff that you don’t need.
- The rules of the site are simple and clear: Anyone can join and post; No self-promotion; and that’s about it.
- There is active participation of moderators on the site, who get involved in discussions and effectively enforce the rules. In addition there are forums for discussion and feedback which again are well maintained and regularly answered.
- The user experience (UX), whilst not being the prettiest I’ve ever seen, is impressive in its functionality and ease of use. A lot of thought has gone into how users interact with the site and as a result it is so simple for people, including tech newbies like me, to post and rate deals and it is really clear which deals are better than others. The deal search capability is effective and the structure of the site allows you to easily browse “hot” deals or simply look at the newest stuff being posted.
- Gamification, gamification, gamification! HUKD has used gamification better than almost any other business that I know of. The deal rating system in itself is somewhat competitive, with users fighting for kudos for finding the best deals. In addition to this there are gradated badges for contribution across elements of deal posting, commenting and vote casting. What I like is that the gamification elements are not intrusive to the experience of using the site but do provide encouragement to increase participation.
- An open API, which allows developers to build widgets and apps using the site’s data, which has resulted in unofficial apps for WP7 and 8 amongst other things.
All of the above results in a strong, highly active and evangelical user community (including myself!). I wish I had access to the analytics, but I think what you’ll find is a business with lots of repeat custom, a very low churn rate and steady growth in users. Given that virtually all of the content is user generated, you’d have to agree that this is a great business model all round.
What I believe HUKD could do to improve:
Phew, after all that evangelising finally a chance to vent! In all honesty I was struggling with ways to improve this business model much so I’m open to suggestions as to how it can be done better, but this is what I’ve come up with so far. These are my own thoughts and it is more than likely that the management of HUKD have thought of all of these and rubbished them with good reason, but some areas for improvement are:
Think of combining the HUKD business model with that of Quidco, founded by the same people as HUKD. Quidco’s main functionality to share affiliate rewards with customers – i.e. if you buy a product by clicking on a Quidco link you will get some share of the rewards that is paid to Quidco paid back to you – explained much better here. Now, the owners of HUKD actually make much more money if people use HUKD to make purchases rather than Quidco as they do not need to share the revenues. However, in almost every HUKD deal there is always discussion around how much cashback you can receive if you use Quidco (or TCB, a competitor) and the hard core savers (like my cousin Paras) will always use HUKD as a resource and usually make the purchase via Quidco or TCB, leaving the owners of HUKD with lower (or no) revenues. To reduce this risk, there may be some way to allow users to combine their Quidco and HUKD accounts to simplify the buying process for these hard core users. In addition, you end up with a very strong business proposition – one which finds the best deals in the market and then offers you a further cashback on the purchases!
Clear the confusion over what makes a good deal! The perennial argument on the comments sections of HUKD is that of conceptually defining what a good deal is. There are broadly two schools of thought: (i) The “discount” school, which basically says that a deal is a deal when it is the cheapest price for that particular item (i.e. if a MacBook Air was discounted by 2% at a certain retailer, but still costing £1,000); and (ii) the “frugal” school which define a deal by more broadly comparing it to similar items in the market (i.e. a 2% cheaper MacBook Air may not be considered a deal as other laptops with similar technical specs are half the price). I’m going to put my head on the line and say I’m from the “discount” school, but my point is that the comments sections would be much more useful if we were all singing off the same hymn sheet. Maybe the blurred lines are what HUKD want (allowing the community to sort it out) but maybe some indicator of the type of deal it was might be useful.
Be more transparent. I believe that HUKD is a great business, but we know very little about its owners and what they are up to. Of course this does not detract from what they have created but it’s always nice to put a face to a business, and these guys should be role models in terms of community creation.
That’s my take on HUKD, a business that works because it’s a community first and a sales channel second. It comes from being a user (not an insider); just to be clear, I’m not in any way affiliated with the business.
As ever, I would love your thoughts (though you have been rather sparse) including criticism! Is there anything I’ve missed? Is there anything HUKD could be doing better? Are you a happy HUKD customer?
In general I will aim to write about the business models that excite me personally. However, if there are any businesses out there that you absolutely LOVE and think I should write about please get in touch. I’m going to apply the HUKD rule and not accept self-promotion, so not your own business please!
* Jen Nikkel definitely involved in Quidco, unsure about HUKD